Quartile Performance and Replacement Costs: What PropStac Data Tells Us

In this week’s data-driven episode of the Follio Property Podcast, Reece and Lachlan utilise Follio’s investing tool Propstac to analyse the Australian housing and unit market across various price points. The Follio team also unpacks markets within markets to analyse upper, median, and lower quartiles, affordability runways, and replacement building costs to better identify where opportunities lie.

Key Takeaways & Market Insights 

• Upper Quartile House Price Declines: High-end upper quartile properties across major cities such as Sydney and Melbourne have fallen to roughly 11% of their peak.
• Lower Quartile and Entry-Level Price Resilience: Lower-quartile and entry-level homes are holding value much better due to more concentrated activity by buyers in more affordable brackets.
• Increasing Replacement Costs Are Creating a Market Floor: As building costs associated with labour, steel and brick continue to surge post-COVID, established units and lower-quartile properties are selling below their actual replacement cost.
• Unit Affordability Runways: PropStac affordability models are indicating that unit markets throughout the country have significantly more room to move before hitting affordability ceilings compared to top-end housing.

Why Upper-Quartile House Prices Are Correcting Faster Than Lower-Quartiles

Upper-quartile houses in both Sydney and Melbourne have both fallen from their peaks by roughly 11%. At the same time, the lower-quartile houses have dropped by less than half of that (5.4% in Sydney and 3.9% in Melbourne). Strict bank-lending rules and a high 10% stress-test rate make it hard to finance properties on the higher end without a larger cash reserve, while entry-level markets are holding their ground better.

“When you’re looking at the upper quartile versus the lower, somewhere like Melbourne has come off nearly two and a half times more on the top end than it has on the bottom end for houses. And Sydney is double what the bottom end’s looking like as well.” – Reece Bedel – Follio Managing Director

Why Unit Markets and Affordable Suburbs Still Have Room to Grow

When tracking affordability against a 6.6% investment interest rate, lower-quartile and unit markets still have room to move. PropStac data shows that these sectors aren’t overvalued, with units in both Melbourne and Darwin holding the highest remaining runway, while units in Perth have enjoyed a healthy correction.

“What’s going to bounce back are the markets with the most runway. From an affordability point of view, they will likely have a higher probability of responding and rebounding, and rebounding quicker than those with less affordability.” – Lachlan Delahunty – Follio Founder and Investment Expert. 

Why Building Costs and Replacement Values Create a Floor for Established Property

Replacement costs – driven by labour, bricks and steel – have more than doubled since the COVID pandemic. This has created a natural floor for how far established property prices can fall. Building a new home or unit now far exceeds the price established properties sell for, meaning lower-quartile homes and units are now insulated from the high replacement costs.

“Replacement cost is really what creates a floor in the market in terms of how far things can fall. Affordability is one of them, but the replacement cost is really the underlying floor.” – Lachlan Delahunty – Follio Founder

Future Predictions & Market Outlooks

• Continued Softness on the Top-End: Upper-quartile properties throughout the major capital are expected to face downward pressure as we enter late 2026, and borrowing capacities remain capped by high lending buffers.
• New Construction Bottlenecks: With feasibility models falling due to lower-end values and higher construction costs, new completions are expected to stall over the next couple of years, further protecting established houses.
• Potential for Rebound in Affordable Sectors: As market sentiment and conditions eventually shift, low-quartile properties that have high affordability runway are positioned to rebound and respond the quickest.

Stay Ahead of Market Changes With PropStac

As Reece and Lachlan break down using PropStac data, today’s property landscape comes down to distinct sub-market speeds. While high interest rates continue to pressure overextended luxury housing, lower-quartile assets and units benefit from strong replacement cost floors and significant affordability runways.

Navigating these shifts successfully requires total clarity over your data. To help investors track performance and uncover opportunities across every suburb in Australia, Follio built PropStac – our comprehensive property tracking platform designed to keep you informed on how your portfolio performs in any market cycle